SAN FRANCISCO--Advanced Micro Devices Inc. (AMD) Thursday (Nov. 3) announced layoffs set to cut the company’s workforce by 10 percent, as well as the termination of some of the firm’s contractual arrangements in measures aimed at reducing operating costs by $118 million in 2012.
The firm says it plans to implement a “more competitive cost structure” by reducing operating expenses by around $200 million next year, $118 million of which will come from layoffs and $90 million of which will come from other initiatives set to streamline the business. AMD did not detail what those initiatives might be, but said they were a “broad set of process transformation activities within the company across finance, marketing and other groups.”
“Think of things like how we handle internal PO approval/routing, etc.,” an AMD spokesman said. The spokesman also pointed to AMD Chief Financial Officer Thomas Seifert’s comments during the company’s earnings call last week, where he mentioned steps that would be taken to streamline business and decision-making processes across AMD’s operations, R&D and go-to-market functions.
“We are in full executional deployment across each of the key work streams,” Seifert said at the time. “These efforts are aimed at accelerating our transformation to a world-class design company….growing revenue, lowering costs and reducing time-to-market. We expect to see material benefits from this project in 2012.”
“This is CEO Rory Read putting his stamp on the company and clearing house,” said In-Stat analyst Jim McGregor, saying the move was “probably long overdue.”
AMD was hiring through the whole of last year, said McGregor, adding that this was certainly the time to be taking a long hard look at the company’s various business units and seeing what had been successful and what had not.
“Every now and then it’s good for a company to clean house and to eliminate instances of duplication left over from the hiring of previous executives,” McGregor said, positing that those executives “with a C in their title” may be those most at risk of being purged.
A source at AMD said 50 percent of the job cuts would affect the company’s North American operations, where around half of the firm’s workforce is based. The firm said the cuts would “occur across all functions globally,” and were necessary in order to “re-balance the workforce skill set.”
A source at AMD explained that this meant the firm would be looking to make cuts in some areas in order to re-hire engineers and staff in areas of larger growth opportunity. These areas include low-power, emerging markets and the cloud.
“This is primarily about looking at our global workforce and determining what incremental skills we need to pursue new growth opportunities in these key areas,” said an AMD spokesman. “Do we have sales/marketing folks in appropriate geographies, etc. If not, we need to get the right people,” he added.
As well as using the money from current layoffs to hire people with more fitting skill sets, AMD said it also planned to “reinvest a significant portion of the savings from the restructuring plan to fund strategic activities,” in the same segments--low-power, cloud and emerging markets.
“Reducing our cost structure and focusing our global workforce on key growth opportunities will strengthen AMD’s competitiveness and allow us to aggressively pursue a balanced set of strategic activities designed to accelerate future growth,” said Read in a press release.
“Shifting the focus to emerging markets doesn’t necessarily mean AMD’s going after low-cost staff,” a source at the company said. Instead, he said, it meant hiring people with the knowledge and skills needed to build products more suited to developing markets.
“Wall Street certainly cheered the move as news of it leaked out during the day today,” said analyst Roger Kay from Endpoint Technologies.
“This is Rory Read's first big reorganization. He has indicated that later on there will be hiring, probably in the high mobility space, where AMD has yet to make a move. Nvdia has moved into ARM processors with Tegra, and Intel is doubling down on Atom, but AMD has nothing in this space,” Kay added.
“While staff cuts are always painful and my heart goes out to those who will be affected, there's a message buried in the press release about changes in AMD's strategic direction that could be quite positive for the company's future,” added Kevin Krewell, a senior analyst at The Linley Group.
“I think that AMD is in the process of altering it's direction and that new trajectory looks a lot like the direction that ARM is taking. So AMD is either heading toward a direct conflict with ARM or it's heading toward a partnership,” Krewell posited.
AMD would not comment on any potential future plans involving ARM, but did say it was highly focused on lower power.